Crypto Firm Terraform Labs Files For Bankrupcy In US
Terraform Labs, company behind failed Luna and TerraUSD crypto tokens, files for bankruptcy as it faces legal charges in US and Singapore
Cryptocurrency firm Terraform Labs, the company behind collapsed coin TerraUSD, has filed for Chapter 11 bankruptcy protection in the US.
The Singapore-based company said the measure was designed to allow it to continue to do business as it faces legal proceedings in the US and Singapore over the failure of TerraUSD and the associated coin Luna.
The two tokens both lost nearly all their value in the space of 48 hours in May 2022, a collapse that was one of several high-profile crypto failures that year – one of these being that of major exchange FTX.
The collapse of TerraUSD and Luna caused Terraform to lose roughly $40 billion (£32bn) in value, and triggered a broader crypto-sell off in which some $400bn was erased from the market capitalisation of tokens such as Bitcoin.
Legal pressure
“This action is necessary to allow us to continue working toward our collective goals while resolving the legal challenges that remain outstanding,” said Terraform Labs chief executive Chris Amani.
The firm said it intended to meet “all financial obligations to employees and vendors during the Chapter 11 case” and would not require additional financing to do so.
It said it had assets and liabilities estimated at between $100m and $500m and between 100 and 199 creditors.
The company said it plans to continue expanding its Web3 business, which includes recently acquired Pulsar Finance, a cross-chain portfolio manager and data provider, and the Station v3 crypto wallet launched earlier in January.
Fraud charges
In February 2023 the US Securities and Exchange Commission sued Terraform and co-founder Do Kwon with defrauding US investors over the TerraUSD collapse.
Last week the SEC agreed to postpone the civil trial against the two until 25 March to allow Kwon to be extradited from Montenegro, where he and former Terraform finance officer Han Chang-joon were arrested in March 2023 for allegedly carrying falsified documents.
Reuters reported at the time that both were carrying false Costa Rican passports and had a separate set of Belgian passports in their luggage.
In November 2023 a Montenegro court agreed to extradite the two, but the country’s justice minister has yet to decide whether the extradition will be to the US or South Korea. A decision may come in March.
